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Citing Increased Fiscal Burden Due to Covid-19, Tamil Nadu Asks Centre to Continue GST Compensation

A briefing after the GST Council Meet on Thursday. (Image credit: Twitter@FinMinIndia)

A briefing after the GST Council Meet on Thursday. (Image credit: Twitter@FinMinIndia)

At present, Tamil Nadu is cutting back on other expenditure to carry out COVID-19 preventive measures and is unable to give up the state's financial resources, Minister Jayakumar said.

The Tamil Nadu government on Thursday urged the Centre to expedite release of Rs 12,258.94 crore, which is its Goods and Services Tax (GST) arrears from the latter since 2018-19 and the outstanding Integrated GST of Rs 4,073 crore for the 2017-2018 fiscal. Also, in view of COVID-19, which has imposed a fiscal burden on Tamil Nadu in terms of scaling up the medicare infrastructure for treatment and improving the health of the people, the Centre should continue with the GST compensation currently being enforced, the government said.

This measure should continue so as to ensure the states do not suffer a setback on the fiscal front, D Jayakumar, Minister for Fisheries, Personnel and Administrative Reforms, who participated in the 41st meeting of the GST council on Thursday via video conference, demanded. The meeting was headed by Union Finance Minister Nirmala Sitharaman.

At present, Tamil Nadu is cutting back on other expenditure to carry out COVID-19 preventive measures and is unable to give up the state's financial resources. "Tamil Nadu's fiscal burden has increased owing to the coronavirus pandemic and the crisis necessitated curtailment of other expenditures to cope with the present situation,"Jayakumar said.

Further release of the state's financial resources could have a serious impact on the implementation of welfare schemes for the poor and downtrodden, he stressed and demanded that the states continue to receive GST compensation. The Goods and Services (Compensation to States) Act,2017 was enacted by the Central Government to compensate the loss of revenue to the states in order to implement the GST system.

According to the law, the central government has paved the way for the states to be compensated for five years at a growth rate of 14 per cent with the financial year 2015-2016 as the base year. The Centre is currently levying a cess in order to compensate states, he pointed out.

"The central government has the full responsibility to find other sources of revenue to augment the upper tax package in order to continue to provide compensation to the states." "If necessary, the Central government should come forward to ensure further legislation to extend the deadline for levying GST compensation surcharge to more than five years," Jayakumar said. In addition, the Centre must provide loans or advances to the GST surcharge fund to provide GST compensation to the states.

This loan can be repaid, Jayakumar said and urged that the GST Council should make the above recommendation to the Central Government.